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Peer-to-peer lending

Peer-to-peer lending

The Bank of England has published a short note on peer-to-peer lending.

The note observes that:

  • Peer-to-peer lending has generally been unprofitable.
  • The rapid growth of peer-to-peer lending may now be slowing down, in part because of finite demand from borrowers (mostly SMEs in the UK). So expectations of scale economies may not be achievable. 
  • Banks retain a cost advantage in terms of lower funding costs, and - as elsewhere in fintech - are beginning to replicate peer-to-peer lending techniques “in house”. 

The future of peer-to-peer lending may therefore have to include some combination of further consolidation, moving into other areas of lending (in the UK, into small unsecured consumer loans), and partnering with established banks.

To discuss this further, please contact a member of the EMA Financial Services Risk & Regulatory Insight Centre.


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